* Ruling could strip founder of stake in firm
* Dispute pits Turkish tycoon against Russian billionaire
* Disagreement has hobbled Turkcell's development
(Adds analysts, details, background throughout)
By Nick Tattersall
ISTANBUL, Jan 28 An arcane British appeals court
will decide this week whether one of Turkey's richest tycoons
can retain control of Turkcell, the country's biggest mobile
phone operator, in a dispute pitting him against Russian
billionaire Mikhail Fridman.
The Privy Council, one of Britain's oldest institutions
whose members are appointed by the Queen, will rule on Wednesday
in the long-running boardroom battle between Mehmet Emin
Karamehmet, one of Turkey's most powerful businessmen, and
Altimo, the telecoms arm of Fridman's Alfa Group.
The Privy Council, the highest court of appeal for many
Commonwealth countries, is hearing the case because Karamehmet
holds his stake in Turkcell through his Cukurova
holding company, registered in the British Virgin Islands.
Should it rule in Altimo's favour, the Russian company could
be awarded Karamehmet's 13.8 percent stake in Turkcell, which
also carries controlling rights through its complex management
structure, leaving Turkcell with no major Turkish shareholder.
The dispute centres around a loan taken in 2005 by Cukurova
from Altimo, which indirectly holds 13.2 percent of Turkcell.
Nordic telecoms group TeliaSonera holds 37 percent of
Turkcell while the remaining 34 percent is largely free float.
Cukurova put its stake in Turkcell up as collateral for the
loan and the argument hinges on whether that loan fell into
default. Altimo says Cukurova failed to pay in time, while
Cukurova maintains Altimo blocked its repayment.
"The resolution is likely to be favourable to Alfa, which
won most previous court rulings ... This opens the way to
creating a functioning new board of directors," said Alexandra
Serova, a Moscow-based analyst at Renaissance Capital.
Other analysts in Turkey said the case, which has been
highly political, was expected to go in favour of Cukurova.
The dispute has left Turkcell unable to agree on the
composition of its board for the past two years, and unable to
distribute dividends or pursue a coherent growth strategy.
Karamehmet, 68, whose interests range from energy and
construction to satellite television and newspapers, has been
embroiled in legal and boardroom struggles with his Russian and
Nordic partners in Turkcell for years.
After founding the telecoms firm in 1994, he was forced to
quit as chairman in 2010 as Altimo and TeliaSonera tried to
limit his influence, although he still managed to install ally
Colin Williams as his successor.
Altimo and TeliaSonera regard Williams, a designated
independent board member, as a proxy for Karamehmet and the
three have been unable to agree on the composition of the board
since then, prompting warnings from the Turkish market regulator
and the threat of legal action from minority shareholders.
Turkish Transport and Communications Minister Binali
Yildirim signalled last year the government may intervene in the
public interest if the dispute dragged on, and some analysts
believe there could be resistance if Wednesday's ruling leaves
Turkcell without a major Turkish shareholder.
"If Cukurova loses the case, it may give rise to the
possibility that Turkish regulators would intervene to keep it
as a Turkish company and the current situation may become more
complex," said Murat Ignebekcili, senior analyst at
Istanbul-based Burgan Securities.
The uncertainty helped push Turkcell shares down 2.5 percent
on Monday, although they were still outperforming a 4.2 percent
fall by the main Istanbul index. A resolution could
ultimately lift Turkcell stock if it paves the way for the
resumption of dividend payments and a clear growth plan.
Should Russia's Alfa Group win the case, it could try to
bring Turkcell together with telecoms group Vimpelcom,
in which it also holds a stake, Renaissance Capital's Serova
said in a research note.
"Making a deal with the Turkish government would be key for
Alfa to make any steps in this direction," the note said.
"We know Mikhail Fridman has travelled to Turkey to meet
high level Turkish authorities ... While we don't know the
details of those meetings we suspect getting support in its
dealings with Turkcell would have been on the agenda."
(Additional reporting by Evren Ballim and Seltem Iyigun;
Editing by David Cowell)